Capital Planning: a critical process Public Institutions

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- All levels of government are in the wake of budget compressions and spending cuts

- Administrators need to:

• Reduce real estate portfolio costs to help improve financial standing

• Address declining asset conditions and evolving agency requirements

• Make sure each capital request is fully vetted

Administrators have decisions to make under tight schedules

The Pressure Is On

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Challenges

- Making trade- offs on different projects

• Each project must be evaluated on its own as well as part of an overall strategy

- Identifying and eliminating personal or departmental biases

• Capital allocations must be made based on value of overall mission

- Mitigating vulnerabilities

- Developing realistic budgets and schedules prior to adoption of capital budget

- Developing a real estate strategy and aligning it with the capital budget

As funding decreases, administrators face various challenges

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The Solution

- Prevents budget shortages or unspent assigned monies

- Substantially mitigates planning risks

- Monitors, measures and reports on capital project

implementation and performance

- Aligns the government’s capital spend and operational strategy

across all agencies to best support the overall mission

- Establishes a prioritization process to provide objective

recommendations across disparate competing needs

A data driven, flexible capital planning process

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Of a data driven, flexible capital planning process

- Fair and defensible

- Justifies capital requests with credible return on investment analyses

- Flexible and able to adapt to changing market and operational conditions

- Shifts the emphasis from reactive to proactive

The Benefits

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Thinking Holistically

- Capital plans should be developed in the context of a long- term strategic plan

- Developing a three to five year capital budget outlook is helpful for aligning budgets and mission requirements over the mid-term

• A formal strategic real estate master plan is ideal

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Unsure? Ask yourself the

following questions:

Does your department need an improved

capital planning process?

- Are our projects usually over budget and behind schedule?

- Do we monitor, measure and report on our performance once projects are in progress?

- Is our capital spending aligned with our government’s priorities, initiatives and real estate strategy?

- Do we conduct sensitivity analyses and evaluate various scenarios prior to submitting budget requests?

- Can we justify capital requests with credible payback periods and ROI calculations?

- Do rapid increases or decreases in capital budgets impact our staffing capabilities?

- Do we have mechanisms to reinvest cost savings in our capital plan?

COPYRIGHT © JONES LANG LASALLE IP, INC. 2014

For more information, please contact

Jennifer Hill

Managing Director, Public Institutions

+1 (202) 719- 5726

Jennifer.Hill@am.jll.com

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